Read the weekly economic commentary from Chief Economist Scott Brown.

June 25, 2018

It was a relatively thin week for economic data. Housing starts rose 5.0% (±10.2%) in May – a strong gain, but not statistically significant. Single-family permits, the key figure in the residential construction report, fell 2.2% (±1.0%) in May, but were up 7.7% (±1.3%) from a year earlier. Homebuilder sentiment edged a bit lower. The National Association of Home Builders’ report noted that “builders are increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability.” The NAHB estimates that “record-high lumber prices have added nearly $9,000 to the price of a new single-family home since January 2017.” The Conference Board’s Index of Leading Economic Indicators rose 0.2% (as expected, given the reported drop in building permits). The Conference Board indicated that “the recent deceleration in the growth of the LEI suggests that the expansion in economic activity is likely to remain relatively strong in the second half of 2018 but should not accelerate.

Speaking at a European Central Bank forum, Fed Chair Powell said that “the case for continued gradual increases in the federal funds rate is strong.” In recent weeks, Powell has deferred on commenting about trade policy (much as the Fed avoids making comments on fiscal policy), but has said that trade policy could be disruptive to the economy.

Tariffs on $50 billion in Chinese goods are set to go into effect on July 6. These apply mostly to machinery and industrial inputs. The proposed $200 billion in additional tariffs on Chinese goods (which sent the stock market down last week – this is U.S. retaliation against Chinese retaliation against U.S. tariffs) would presumably go into effect some time later and focus mostly on consumer goods. Beyond that, we may see tariffs on imported motor vehicles and parts, which would be much more disruptive to the economy. It’s difficult to put a precise handle on the direct impact of tariffs, but worst-case scenarios are on the order of shaving 1-2% from GDP growth over the next year (not enough, by themselves, to cause a recession). However, we may also see higher inflation, greater uncertainty for business fixed investment (at home and abroad), and possible financial market disruptions.


The opinions offered by Dr. Brown should be considered a part of your overall decision-making process. For more information about this report – to discuss how this outlook may affect your personal situation and/or to learn how this insight may be incorporated into your investment strategy – please contact your financial advisor or use the convenient Office Locator to find our office(s) nearest you today.

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates (RJA) at this date and are subject to change. Information has been obtained from sources considered reliable, but we do not guarantee that the foregoing report is accurate or complete. Other departments of RJA may have information which is not available to the Research Department about companies mentioned in this report. RJA or its affiliates may execute transactions in the securities mentioned in this report which may not be consistent with the report’s conclusions. RJA may perform investment banking or other services for, or solicit investment banking business from, any company mentioned in this report. For institutional clients of the European Economic Area (EEA): This document (and any attachments or exhibits hereto) is intended only for EEA Institutional Clients or others to whom it may lawfully be submitted. There is no assurance that any of the trends mentioned will continue in the future. Past performance is not indicative of future results.

By | 2018-06-27T12:07:48+00:00 June 27th, 2018|Economy, Latest Articles|